What is verbal verification of employment?

When applying for a loan or a mortgage, you have numerous forms and processes to complete before getting your money. One of the final parts of the loan process is the verbal verification of employment or VOE.

This is a process that typically takes little time and effort on your part, but it’s still worth understanding. There are certain situations that require your participation, and the process can vary for those who are self-employed.

First, let’s examine what the process is before diving into how the process works.

What is verbal verification of employment, and why is it needed?

If you’ve applied for a loan or a mortgage, the lender needs to ensure that you’re likely to repay the money. A lender uses a VOE to verify that you’re still employed and making what you claim to make during the time of the loan application.

The VOE process ultimately serves to reduce the risk for lenders, which is why it’s generally performed near the end of the loan process. By having the VOE near the closure and delivery of the loan, the lender can be sure you’re making enough to pay for the loan and won’t default.

In some cases, the VOE will even be done after a loan is closed on, but before it is delivered. Again, this is to protect the lender and increase the chances that the loan will be paid in full.

The VOE process

The VOE process is straightforward and involves a basic form and a confirmatory call to the applicant’s employer. A loan typically takes roughly 40 days to close, with the VOE process taking place near the end of that process. The process should take no more than a few days to a week, as long as there are no complicating factors.

The VOE process can vary slightly depending on the lender. For Fannie Mae, one of the most prominent lenders in the mortgage space, the process is as follows:

• You complete Form 1005.
• If it’s an FHA loan, Fannie Mae requires your most recent pay stubs and W-2 forms.
• Fannie Mae independently finds the number for your employer.
• Your employer is called no more than 10 days before the loan closure (or 120 days if you’re self-employed).
• The call is documented, and your employment is confirmed with the employer.
• The loan is closed and delivered.

If you’re self-employed, you’ll be much more involved in the verbal verification of employment process. Again, the process can vary depending on the lender, but it typically goes as follows:

• Apply for a loan, which initiates the VOE process.
• Complete Form 4506, a Request for Copy of Tax Return to give to the lender.
• Contact your accountant or the Certified Public Accountant (CPA) of the company you do contract work for to tell them you’re applying for a loan.
• The lender contacts your accountant or company CPA to confirm your income.
• The loan is closed on and delivered once your income is verified.

The process can vary, and the time it takes isn’t set in stone either. The VOE is generally a small part of the overall loan process and doesn’t take much time, but there are hangups that can cause things to take longer than anticipated.

Potential verbal verification of employment hangups

Ideally, the verbal verification of employment process is quick and straightforward. But, there are some issues that can cause delays in the process or disqualify you from receiving the loan entirely.

• **A large deposit is made: **Sudden large deposits in your account can raise suspicion and be a concern to lenders. A large deposit is typically an amount that equals 50% of the income required for the loan or enough to alter the debt-to-income ratio used to determine the loan rate. If the lender asks you about the deposit, be calm and explain where the deposit came from, and your loan will likely proceed.
• **A large withdrawal has occurred: **A large withdrawal from your account can also cause concerns with the lender. Again, explain why there was a withdrawal, and your loan should still be processed, as long as it was only a one-off withdrawal.
• **One or more checks have bounced: **If any of your checks bounce, this can concern lenders—they may worry about your ability to pay and your spending habits. Explain why the check(s) bounced and make it clear that this was an unusual situation, and the loan may still clear.
• **Sudden employment changes: **Sudden job changes can happen, especially for the self-employed. This can be a disqualifying event for a loan in some cases. Explain to the lender why you changed jobs so quickly, and the lender may simply run through the verification process again, causing a slight delay.

There are a number of complicating factors and situations that can interfere with the VOE process. In any event, stay calm and be prepared to explain to the lender why that situation occurred. Sometimes an explanation can simply require a call or a meeting with the lender. There may be instances where you’re required to provide financial documents that prove why a deposit was made, a withdrawal occurred, and so on.

In many cases, lenders will be understanding. Even if you’re disqualified from a loan this time, you can always reapply once things have settled down on your end.

Getting through the verification process

The verbal verification of employment process is generally straightforward and requires little effort on your part as the applicant. Make sure your accounts are in order, avoid any sudden job changes, and don’t take it personally if a lender reaches out to you with any concerns. They’re simply doing their job and ensuring you’re a solid applicant.

Before you know it, the VOE process will be over, and you can be settling into your new house or using your loan to better your life in some way.